Did you know you might still owe money even after you meet your deductible? That's something that not everyone realizes when they sign up for a health plan.
You may still owe a specific coinsurance amount even after you reach your deductible, as outlined by your health plan. Let's discuss the very basics of coinsurance and how it works.
Coinsurance means you pay your share of the costs of a health care service. Coinsurance refers to the amount you must pay for covered health care after the deductible is satisfied. (Your deductible refers to the amount you pay for covered health care services before your insurance plan kicks in and begins to pay.)
Coinsurance generally looks like a fixed percentage, or a percentage of the total cost of care, usually 20% or 30%. Your insurance company covers the rest. You might think of your coinsurance as similar to your copayment, or copay. However, copays require you to pay a set dollar amount at the time of the health service, unlike coinsurance.
Coinsurance goes toward your annual out-of-pocket maximum. Your health insurance company can't require you to pay more than your yearly out-of-pocket maximum cost (which includes the deductible, copays, and coinsurance) each year.
Health care plans with low monthly premiums usually carry higher coinsurance, and in general, plans with higher monthly premiums carry lower coinsurance.
Here's how coinsurance works in a nutshell: Let's say you paid for your health care expenses and met your deductible. Then, when you go to the doctor, you don't pay all the costs involved. Instead, you and your plan share the cost.
For example, let's say your coinsurance is 30% and your health plan's allowed amount for an office visit totals $100. If you've already paid your deductible, you pay 30% of $100, or $30, and the insurance company pays the rest. If you haven't met your deductible, you pay the full amount, or $100.
A copay is a flat fee that you, the policyholder, pays for a health care service. You may pay your copay before or after you've reached your annual deductible. The copay allows you and your insurer to share the costs of health care. Your insurer determines your copay amount in advance.
Let’s take a look at how copays and coinsurance work together.
Let's say you fell off a ladder in your garage and you stopped your fall with your hands, injuring your wrist.
- You pay your primary care copay of $30 before you see your primary care physician.
- Your doctor decides you need an X-ray, which costs $1,000.
- Let's say your insurance deductible is $500 and your coinsurance responsibility is 30%.
- You'd need to pay the $500 for the deductible portion and you’d also be on the hook for the remaining 30%. Your health plan would pay for the other 70%.
- In this case, you’d pay $800 for the X-ray, plus you'd also need to pay the $30 copay.
What should you do if you can't afford your insurance payments?
You may want to get supplemental insurance, which covers costs above and beyond standard health insurance policies. You may use it to pay out-of-pocket expenses that can occur through serious injuries or illnesses. You can use it to pay for a variety of items related to your illness or injury, including lost wages, transportation, or medication. You may want to look into these specific types of supplemental health insurance:
- Critical illness insurance or cancer insurance: This type of insurance can cover additional costs related to cancer, an organ transplant, stroke, or heart attack. Some critical illness plans tap into one specific type of illness or long-term illness.
- Accident insurance: Accident insurance can give you a lump-sum cash benefit in the event of an accident related to burns, fractures, deep cuts, ambulance costs, emergency treatment, and ongoing care related to the accident.
- Hospital insurance: You can pay for deductibles, prescriptions, and other costs with hospital insurance.
- Disability insurance: Disability insurance helps you keep a percentage of your income if you become too sick or injured to work.
Americans over 65 and those with disabilities can tap into a Medicare Supplement plan (also called Medigap) as well. Medigap helps pay for copays, coinsurance and deductibles. Some plans even cover medical care when you travel overseas.
You may also want to consider a few other options if you can't make your payments:
- Use emergency savings. If you have a stash of money saved up, this can offer a great approach to paying your bills. Experts recommend having at least six months' worth of money saved for emergencies.
- Negotiate a payment plan. Your health care provider may allow you to pay your bills over time. Check with your hospital billing department so you understand your options and to set up a monthly payment plan or another type of plan.
- Look for cheaper health care options. You may want to switch to a cheaper health care plan. A lower deductible may change the game for you, though you may pay more in health care premiums. Some clinics will charge you based on your income, so you can also look into alternative health care options as well.
- Check into employee assistance charity programs. Often, companies allow their current employees to help other employees pay for one-time financial hardships by deducting money from their paychecks throughout the year. If you face financial hardship due to health care, check with your human resources or employee benefits office to find out how you can access charity to help pay your bills. Then, once you get back on your feet, turn around and donate each month out of your paycheck to others in need.
Remember that since coinsurance makes up a percentage of the total cost of medical services, the amount you'll pay for coinsurance changes with each type of health care service you get. Coinsurance will rise and fall, depending on whether your service costs a small or large amount of money.
Also remember that once you hit your out-of-pocket maximum for the year, you don't have to pay any more coinsurance as long as you follow the rules set by your health insurance plan.
Melissa Brock is the founder of College Money Tips and a full-time freelance writer and editor. She loves helping families navigate their finances and the college search process.
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